Currency exchange - a rate that is only true for a few seconds

Why this design

Any product that lets money cross a border - a wallet, a remittance app, a marketplace paying sellers abroad, a card spending in a foreign currency - has to answer "how much will I get?" with a number it will honour. The naive design reads a rate at the moment of execution and multiplies; the customer sees one number and receives another. Interviewers use this question to see whether you model the quote as a stored, expiring promise, whether you know a cross-currency movement must balance per currency, and whether you can say exactly where a rounding fraction goes. Treasury teams care about the next layer: every executed quote leaves the company holding currency risk until it is hedged.

What you will learn

• Why a quote is a row with a frozen rate, both amounts already rounded, and an expires_at - and why execution spends a quote id, never "the current rate".
• How a mid rate is built from three feeds, and why staleness is a reject, not a warning.
• How the spread and the rounding rule are applied in that order, in integers, per currency’s minor units (USD 2, JPY 0, KWD 3).
• Why a conversion is four ledger entries in two currencies through FX position accounts, and each currency sums to zero.
• How the company’s resulting exposure flows to treasury and is netted before it is hedged.
• The honest weakness: a 30-second quote is a free option, and nothing here withdraws quotes when the market gaps.

How to read this board

1. Diagram, left to right: RATES (a number that decays), QUOTE (a promise with an expiry), EXECUTE (only a live quote can be spent), TREASURY (the risk you kept). Press play for the walkthrough.
2. Below it, RECONCILIATION: quoted vs executed vs hedged, and where rounding went.
3. Then the DATA MODEL: five tables. Note conversions is UNIQUE on quote_id.
4. Pages 1-3 · Requirements, Capacity and Storage: 5 M quotes a day, 1,170 ticks a second in.
5. Page 4 · Availability - why a stale rate stops quoting rather than guessing.
6. Page 5 · How it works - 1,000 USD to EUR end to end, then Page 6 · Deployment.

The service quotes and executes currency conversions for customers holding balances in several currencies. It does not set the market price - it buys rates from liquidity providers - but it sets its own spread, owns the rounding rule, and holds the resulting position until treasury covers it.

Ask these before designing

• Firm quotes or indicative? A firm quote is honoured if accepted before expiry. An indicative one is re-priced at execution. Firm is what customers expect and what this board does; it is also what creates the free option.
• How long is a quote alive? 30 s is common for retail. Longer helps conversion rate and costs margin; shorter annoys people on slow phones.
• Which side is the customer fixing? "Send exactly 1,000 USD" and "receive exactly 900 EUR" are different calculations and round on different sides.
• Which way does rounding go, and where does the remainder land? Half-even on the received amount, with the difference absorbed by the FX position account, is one defensible answer. "Always in our favour" is another, and is a regulatory conversation.
• Do we hold the risk or pass it through? Matching every conversion one-for-one with a provider trade removes risk and adds 200 ms and a fee to each. Netting and hedging above a threshold is cheaper and leaves the company exposed in between.

Functional

• Build a mid rate per pair from multiple providers; reject a pair whose freshest good rate is older than 2 s.
• Issue a firm quote: sell amount, buy amount, all-in rate, expiry.
• Execute a conversion against a quote id, once, before expiry, by the customer who requested it.
• Post the conversion to the ledger as balanced entries per currency.
• Track net position per currency and hedge it above a threshold.
• Reconcile daily: quoted margin vs realised margin vs hedge cost.

Non-functional

• Quote p99 under 80 ms; execution p99 under 200 ms.
• A rate older than 2 s is never quoted. Better to refuse than to quote a number the market has left.
• Every executed conversion is reproducible from the stored quote - rate, rounding, amounts - years later.
• Integer minor units in the ledger, always; rates stored as NUMERIC(18,8), never floats.

Out of scope

Payment rails, KYC, card-scheme FX, the provider contracts and treasury’s hedging strategy itself.